RBI comes up with PCA framework for large NBFCs

The Reserve Bank of India (RBI) has introduced a prompt corrective action (PCA) framework for large non-banking financial companies (NBFCs) with effect from October 2022, putting restrictions on para-banks whenever vital financial metrics dip below the prescribed threshold. This brings them almost on a par with banks in terms of supervision and regulatory reach. The PCA framework for NBFCs comes into effect on October 1 next year on the basis of their financial position on or after March 31.

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About the PCA framework:

• The PCA framework will be applicable to All Deposit-Taking NBFCs (NBFCs-D) and All Non-Deposit Taking NBFCs (NBFCs-ND) in the Middle, Upper, and Top Layers. It will put restrictions on para-banks whenever vital financial metrics dip below the prescribed threshold.
• The move will bring NBFCs almost on a par with banks in terms of supervision and regulatory reach. This follows scale-based regulations and revision in non-performing asset norms brought in by the regulator for the sector.

Important takeaways for all competitive exams:

• RBI 25th Governor: Shaktikanta Das; Headquarters: Mumbai; Founded: 1 April 1935, Kolkata.

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